Remember when we were all sure 3M was going belly up and we tried to jump ship to solventum? Well, joke is on all of us. 3M stock has appreciated 88% since spin off and SOLV 11%. S&P is up 44% during sane time frame. 3M Healthcare was a crown jewel in 3M and is somehow bo----g post spin. Make it make sense.
12 replies (most recent on top)
@k0 100%. But also isn't this a corporation 10 commandment rule? Basically stock goes up means "I did it and am the best ever" and stock go down means "oops tariffs are real bad, not our fault, but we'll fire some poeple to make up for it."
At a townhall where present on being a "top quartile performer," they use the Apr 1 '24 stock price, which is a misleading value i think (opening day).
Why not use a price after some time to settle. Firms and portfolios evaluating it, 3M shareholders now owning SOLV decide to keep or sell? Using that specific price lets them outperform "peers" (why those peers?), but I don't know if we are a "TQP" with a different start price or different peers.
@jr yes BUT what about all the $$ to executives for no results. That’s more troublesome to me
@dw that's a decent rundown. I find myself skeptical on $100M for computers (ongoing, or you're saying pre-spin when we had 3M computers still?) but you are convincing me it's a bigger contribution to 3M's bottom line than I thought.
@c2 HIS and or-l care will be the next to go. I am convinced they want to strip everything down to MedSurg to make Solventum an attractive acquistion. And where did a good chunk of the leadership team come from? Don't be surprised when Medtronic acquires Solventum, once HIS and or-l care are divested.
@dm They're playing the media to their favor on the "announcements" about Microsoft, Airbus and so-called new innovation. With Microsoft, it's a one-time sale per data center installation. In a company the size of 3M, it's minor in the big picture. Employees report the Airbus "deal" is largely a continuation of something that has already been going on. The innovation interview also appears to just be for show, as employees report product development spending continues to be restricted, and there was another multi-billion dollar lawsuit filed over PFAS that they would like kept out of focus.
No disagreement about Solventum management being in it primarily for benefit of themselves and friends, but unlike Imation, there is a healthy, profitable business with a future. It carries a heavy weight from the one-sided 3M deal that is should eventually be able to get out from under, but will take years. The 275 rent was $43MM/year. Don't have details, but have been told the computer costs paid to 3M run well over $100MM/year. Again don't have details, but there is a large amount of raw materials coming from 3M at periodically increasing mark-up from what they cost before spin-off. Due to regulated healthcare products, changing raw material suppliers is a big process that takes a lot of time. In a low-ball, scratch calculation, if 3M raw material cost represent only 10% of Solventum sales, that's $800MM sales to 3M and tens to hundreds of millions in profit. Add all the other payments Solventum has to make to them and it comes to several percentage points of 3M earnings, plenty of "growth" to hype up to get stock gains even if the underlying picture is mediocre.
Imation II, the 3M Legacy Lives On!!!
Of course, another lawsuit from left field could turn those "great" numbers of 3m to "sell, sell, sell" at the drop of a hat.
Don't trust the manipulated market.
@OP 3M seems to have just cut a major deal with Microsoft, which is what some analysts are quoting as the foundation for the recent sharp increase. That jump aside, I sold my incoming Solventum stock and bought 3M or S&P index shares instead. I've been very happy with that strategy. I have no trust in the top Solventum management. I agree with other posters that many of the financial moves seem designed to enrich the new top managers as opposed to growing the Solventum company. Either way, the current approach leaves a lot of people right in the way of trains they didn't see coming!
Alternate take: the 3M PFAS settlement finalized Apr 1 2024, same day as spin. I get Solv took on $8B in debt, but is that really what suddenly made 3M more attractive?
Keep in mind the stock isn't "up," it's recovered to 2021 levels (albeit at a company 3/4 the size, so that's something). But I wonder if the story is more like investors were perpetually in fear of litigation (Combat Arms and PFAS) that, at the time, had no upper bound.
Aug 2023 and Apr 2024 capped it at $6B and $10B, respectively, and to my knowledge that is the hard limit (not going to see new lawsuits). This let the fear subside, and it's bounced back. Just a thought.
Otherwise... to support this premise, I'd dig in the last 3yrs of annual reports to try and measure what impact Solventum has actually had on 3M financials. If it's negligible, this is mostly perspective and sentiment, not the balance sheet.
@cn Interesting hypothesis, my initial reaction is not thinking this would be that much of a boost to financial metrics for a now ~$24B company?
Like compared to all the other headwinds and tailwinds that can happen in any give year (say, tariffs), you think renting out 275 and selling RMs (and how much is Solventum using vs. what was retained at 3M?) ~doubled the 3M stock price?
Could 3M not have just consolidated office space sooner to rent out 275 to anyone, and been doing this all along?
@cn Also meant to include the $8 billion in debt 3M transferred to us, another thing that was a big help to their situation, at our expense.
Part of 3M's story is all the money they are taking in from us. Solventum has been paying them large amounts for office & lab space, computer systems, use of 3M logo on products, inflated prices for raw materials (raw material costs have jumped tremendously compared to cost incurred when we were part of 3M; that alone takes a big bite out of our margins). These benefits for 3M will drop significantly this year with exit of real estate and computer systems, along with incremental shift away from their raw materials. They also sold a chunk of our stock last year to boost their numbers and still hold a significant portion of it, that they can use to pump up their numbers as needed. When all these things run out, there will be a clearer picture of what's really going on over there, which is likely less rosey than they have been playing up in the news.
@OP Makes sense because 3M hasn’t hired their own family members like Solventum and given them golden parachutes! Solventum is a private equity company that cares nothing about its employees… Oh we bought a small co big deal…
Once Solventum fully breaks away from 3m the quality of the products will go down because they only care about costs…
Christmas layoffs will be here before you know it have a plan B! Just saying… I will be outta here by then and can’t wait